These are the three factors that provide Tripadvisor (TRIP) with optimism for 2021

Shares of Tripadvisor Inc. (NASDAQ: TRIP) were up 3.3% in afternoon hours on Friday. The stock has gained 37% since the beginning of this year. The company reported earnings results for the fourth quarter of 2020 a day earlier, posting a 65% year-over-year decline in revenue and a loss of $0.41 per share. Despite these challenges, Tripadvisor remains optimistic about 2021 mainly due to three reasons:

Vaccines

The COVID-19 pandemic impacted the travel industry significantly during 2020 and Tripadvisor too felt its effects. The company saw revenues drop 62% and 67% in its Hotels, Media & Platform and Experiences & Dining segments respectively during the fourth quarter.

Going into the fall and early winter, monthly revenue recovery slowed due to a resurgence in the pandemic in places like Europe. Revenues in November and December were down to around one-third of the levels seen a year ago.

Although revenues in January were down compared to December, it has seen a sequential improvement in February with a more pronounced increase than previous years. Based on current trends, Tripadvisor expects the first quarter of 2021 to be similar to the fourth quarter of 2020 but the company believes leisure travel can improve materially in the second half of the year as vaccines are rolled out and demand improves.

Pent-up travel demand

Tripadvisor is hopeful that pent-up demand for travel will continue to grow in the coming months allowing for a change in the present scenario later in the year. The company saw a relatively high level of consumer interest in travel during the fourth quarter. In December, monthly unique users were around 59% of the comparable period in 2019. This was better than the 33% level seen in April.

Tripadvisor said its consumer surveys indicated that 57% of global consumers have spent time planning for future trips during the pandemic and 74% will spend more time choosing a destination this year. Although the majority of near-term bookings are for domestic travel, nearly one-quarter of respondents said they plan to take three or more international trips in 2021. Customers planning hotel stays of more than 90 days have grown approx. 50% since December 2020 which indicates a growing interest in planning vacations in 2021.

Cost reduction and liquidity

The company’s own efforts to reduce its costs and boost its liquidity position gives it confidence going into this year. Tripadvisor has been focused on reducing its expenses since the start of the pandemic and during 2020, the company achieved more than $200 million in workforce-related and discretionary fixed cost savings compared to 2019. Tripadvisor expects the majority of the fixed cost savings of 2020 to continue in 2021.

In December, Tripadvisor amended its revolving credit facility. The company ended 2020 with $418 million of cash and cash equivalents, which was up from last year’s level, and nearly $500 million in available borrowing capacity under its revolving credit facility.

Click here to read the full transcript of Tripadvisor’s Q4 2020 earnings conference call